City administrators give views on state of Westside businesses

This is Part II of the Westside Council of Chambers’ (WC3) inaugural 2011 State of the Westside “Making Business Work” event, which took place on Oct. 25 to address the state of businesses on the Westside and included a panel of four city managers and a deputy mayor.

Geoff Maleman, the WC3 governmental consultant and event moderator, said the Metro Exposition Line is expected to bring 31,000 more people to the beach and he asked Gould what Santa Monica is doing to prepare for the arrival of the light rail.

“Traffic congestion is a big issue but Phase I is nearing completion, and Phase II, which involves Santa Monica, is now beginning construction and will have three stations in Santa Monica making it a major change for 100 years to the Westside,” said Gould. “We’re very excited about it and it’s generated a lot of new interest in development, particularly train-oriented development.

“Santa Monica is currently on the cusp of a building boom, and the city is looking at 2.3 million square feet of commercial, 2,300 housing units, with a third of them affordable, and 600 new hotel rooms, occurring in the next two to seven years,” Gould noted.

“That’s more development than the city has seen in three decades, making it much more vibrant and transit-friendly, and it will make the city much more bicycle-friendly. During the same period of time, the city has $350 million of capital projects over the next three years,” he added.

Public/private partnerships are “sort of the overused buzz words,” said Maleman. He said The Montage Hotel in Beverly Hills is a good example of a partnership project that did work, and he asked Kolin to discuss the project.

“It’s an excellent example of what cities can do with public/private partnerships. This is one of the primary tools since the future of development is more uncertain than ever before,” Kolin said.

Kolin mentioned an upcoming court case that would determine if cities have that tool in the future, saying “Many cities had funds earmarked and preserved those funds, but it will be a significant loss.” [The court case to be heard this month relates to community redevelopment funds and the state of California’s attempt to use those funds for the state’s budget problems.]

Kolin noted that Beverly Hills doesn’t have a redevelopment agency, so the city utilizes public/private partnerships.

“The city views these as a co-developer. The city evaluates real estate, risk management, just as a developer does, and that’s how the Montage Hotel was approached. The city negotiated a development agreement with a significant return of resources to the city,” said Kolin. He believes this type of arrangement is a model for the future, adding that leasing of commercial parking facilities also brings in funds, as the city operates like a private business.

Nachbar said the investment on the Westfield Culver City shopping center project was a basic success story.

“The mall was in need of some help, and the city invested about $10 million in increments over a 10-year period, resulting in a partnership with Westfield on 225,000 square feet of new space and new specialty stores. Westfield reopened in 2010, in the midst of the downturn, but has been an amazing success,” said Nachbar.

“Sales have succeeded expectations and a number of the specialty stores are setting chain-wide records. It’s a great example of public/private partnership and how it can ultimately result in positive economic growth not only for the private sector but also for the city coffers.”

Asked how West Hollywood was so successful, Arevalo said the city inherited a tremendous infrastructure, has active business leaders, and they are constantly in the press.

“Santa Monica Boulevard and the Sunset Strip are widely recognized. From the city’s perspective in terms of hotels, it has always benefited from surrounding cities and doesn’t view them as competitors, with hotels and tourism always benefiting from other nearby cities,” he told the audience.

Karatz was asked about what the city of Los Angeles does to stop film production from shifting to other cities and countries.

“There’s a citywide strategy to cut the red tape. The city and county and state have taken this all for granted. Runaway production has to stop because it is costing the city enormously,” he said.

“There is a state level tax credit for film production. Ours is $100 million, and we are nearing the end of a five-year term for $500 million. As far as competition, the state of New York has a $400 million tax credit. We have talked to decision makers at studios about how they make the decisions, and at the end of the day, it’s all driven by the bottom line,” said Karatz.

“We have to do a better job. At the city, we are trying to make life as easy as possible by not charging film productions to use city-owned property. We are trying to make parking lots available on weekends and holidays, and we’ve opened up city hall for their use.

“We are working very hard at the state level to see if we can’t make a meaningful difference in increasing the tax credit for these film productions. One of the challenges is that most of the legislative representatives from the north see it as a Los Angeles benefit, and not a state benefit,” Karatz said.

Maleman asked the panelists what primary issue they see facing the Westside over the next five to 10 years.

“Mobility is the biggest issue, and I’m very happy that the voters approved the transit system that will move more people more efficiently, being able to get around the Westside, and improving the environment, weaning ourselves out of the car culture,” Gould said.

Kolin said the local community seems to support a subway extension to the Westside based on data from Metro studies.

Nachbar told the audience, “The city is preparing for some time for the Expo Line, and has invested approximately $40 million in land, assembling property to facilitate the construction of transit-oriented development projects. The project would cover approximately six acres around the stop, with the potential of approximately 650,000 square feet for development.

“The city is speaking with developers to determine interest. There’s a lot of excitement about the new transportation model, and major developers are anxious to be the first to build,” he said.

Arevalo told the audience that one of the challenges is also political ineptitude in Sacramento.

“Their actions really limit our ability to come up with solutions to problems. We have a financial base in all of our cities; they’re all in jeopardy, and for us to be able to move forward with significant projects, invest in development and to subsidize regional transportation, without all the resources in place we’re not going to be able to do anything.

“Right now, it’s the goal of Sacramento to bring down all levels of government, and that’s the significant challenge to me. If we want to do anything else, we need to protect our resources,” Arevalo cautioned.

For the last question, Maleman referred to the city of Los Angeles as the “600-pound gorilla” impacting everyone else, including the Westside cities, and he asked Karatz about the improvements at the Port of Los Angeles and Los Angeles International Airport.

Karatz said, “The last time LAX made renovations was pre-Olympics in 1984, so for 30-plus years, nothing happened at the airport. It’s created a sense where it’s lost its identity. It is a place where first and last impressions are made for the Los Angeles area, and it’s really not one that we ought to be proud of.”

He said that Gina Marie Lindsey, the executive director at LAX, “has taken on an enormous task of spending over $4 billion in five years to completely redefine and modernize LAX. As we look at LAX it’s not a council district issue or a city issue, it’s a regional issue.”

Karatz told the audience “Lindsey met with Asian airline representatives in Singapore about LAX being the hub for more A-380 aircraft. Every A-380 that comes in daily, it generates between $620 million and $630 million in economic numbers to the region. We can’t compete for these A-380s or any flight if we don’t have a world-class facility. The modernization of LAX has far more regional impact. The expansion of Bradley West Terminal is impressive and has enormous implications.”

Gould was asked about occupancy and room rates related to tourism in Santa Monica.

“Visitors and tourists came back far faster in February, and there is a 91-percent occupancy rate throughout the year, the second highest room rates to Beverly Hills. This wouldn’t have happened without a world-class airport, which is essential to tourism and so many businesses,” he noted.

Kolin was asked about the real estate market in the short- and long-term.

“There is a long way to go in the housing market, particularly for new products. The Westside is far better than the average community in the state or the country. Property tax revenues had fallen by at least one percent in the community, but it’s a positive sign that they’re back up this year,” he said.

“We don’t see the luxury condominium market returning for the foreseeable future, so it’s a very difficult market for financing. The tremendous amount of rebuilding, reconstruction, remodeling, expansion of existing stock in our community, it’s probably busier than it has been, but they’re smaller, existing projects, and we’re not seeing the same kind of large scale residential development that we were before,” Kolin said.

Nachbar was asked about the impacts from Sacramento on the Westside.

“Working together is the key, and working alone, ‘our voices are not as strong’. The WC3 is getting together in terms of advocacy and accomplishing goals, working on common issues. I agree with (Arevalo) that mobility may be our most immediate concern but the overarching concern is the condition of the state. That’s probably the biggest threat to the health of all of us,” Nachbar cautioned.

“It’s incumbent upon us to try to do what we can to help facilitate some solutions at the state level. The more we can work together on the Westside, present a strong voice and play a role to influence solutions is certainly in our best interests,” concluded Nachbar.

Asked what advice he would give to other cities, Arevalo responded, “Invest in infrastructure, and be fiscally conservative.”